Various aspects of cash;

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34 HASKINS & SELLS May
THE asset of cash occupies an obvious­ly
important place in every business
enterprise. It is the medium through
which practically all transactions eventu­ally
are consummated. Barter is extreme­ly
rare in modern society.
At the inception of an enterprise cash
is required for the purchase of plant and
equipment, furniture and fixtures, and
other things necessary to the functions
of the business. Occasionally such prop­erty
is paid for by the .issuance of capital
stock to the vendors. Usually, however,
the greater part of it is paid for, within a
short time if not immediately, in cash
invested by the proprietors or obtained
from the issuance of securities to the
public.
Cash is indispensable in the current
operations of an enterprise. It is required
for the purchase of materials and sup­plies,
payment of salaries and wages, and
settlement of expenses. Although ma­terials
usually are purchased on credit,
cash is required for final discharge of the
liability. These materials are used in
production, and together with wages and
expenses pass into inventories. As goods
are sold, the values represented by the
inventories pass, plus a profit, into ac­counts
receivable, and sooner or later are
liquidated into cash, thus completing the
cycle. Cash, therefore, occupies a pivotal
position.
Cash may be considered generally from
three angles. From the point of view of
accounting there arises the question of the
definition of the term and the position of
cash in the balance sheet. From the
standpoint of irregularities there is the
necessity of safeguarding the funds against
improper use and embezzlement. From
the viewpoint of sound business there must
be considered the question of conservation
of cash resources and control of financial
operations.
In deciding what constitutes cash, it
may be necessary to classify any or all of
the following items: foreign currency;
certificates of deposit; deposits to secure
service or the return of property such as
containers; deposits made by employes
for keys or badges; deposits with trustees
for sinking funds; advances to agents or
others for working funds; vouchers repre­senting
disbursements from petty cash
funds, not yet reimbursed; payroll ad­vances;
checks cashed for employes; etc.
In many instances this question is of more
than academic importance. A banker,
for example, is vitally interested in know­ing
whether the item of cash in a balance
sheet submitted by a prospective bor­rower
includes a large amount of payroll
advances and vouchers not yet reimbursed,
or whether the entire amount is immedi­ately
available for discharging current
liabilities.
The pivotal position of cash, resulting
in a continuous flow of checks and cur­rency
through an enterprise, and the ease
with which cash may be exchanged for
goods in satisfaction of one's wants, thus
losing its identity, make it imperative that
safeguards be placed around those who
handle cash, in order to prevent misap­propriation.
Systems of office routine,
control, and internal check, should be so
arranged as to render it practically im­possible
for a dishonest employe to commit
embezzlement without immediate detec­tion.
Opportunity for fraud depends
largely upon the extent to which the
cashier has access to incoming receipts,
particularly currency, and the ease with
which he may withdraw funds from the
bank. Opportunity for concealment of
irregularities depends upon the extent
to which the cashier exercises control over,
or has access to, the collateral records.
Probably most discussions of cash are
written from the standpoint of irregu-
The Various Aspects of Cash